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«Introduction Even though neither theoretical arguments nor historical evidence provide reasons to believe that the ideals of liberalism may be better ...»

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Hayek (1978c: 143): “Thus, though the consistent application of liberal principles leads to democracy, democracy will preserve liberalism only if, and so long as, the majority refrains from using its powers to confer on its supporters special privileges which cannot be similarly offered to all citizens.” -- Hayek (1978b: 110): “Once such discrimination is recognized as legitimate, all the safeguards of individual freedom of the liberal tradition are gone.” Commenting on Rousseau’s and Kant’s concepts of democracy Habermas (1992: 611) says about the principle of popular sovereignty („Volkssouveränität“): „Der vereinigte Wille der Staatsbürger ist, da er sich nur in der Form allgemeiner und abstrakter Gesetze äußern kann, per se zu einer Operation genötigt, die alle nicht-verallgemeinerungsfähigen Interessen ausschließt und nur solche Regelungen zulässt, die allen gleiche Freiheiten garantieren.“ unlimited democracy is bound to become an instrument in the service of special interests.60 To critics who accuse modern democracy for being a “mass democracy” Hayek (1979: 99) responds: “But if democratic government were really bound to what the masses agree upon there would be little to object to.” What, in his view, deserves to be rightly criticized is, instead, the fact that what is called “the will of the majority” has in reality little resemblance to what might justly be called the “common will” (1979: 1). The so-called “will of the majority” is, so Hayek’s verdict, “really an artifact of the existing institutions” (1978b: 108), of institutions that create conditions under which “even a statesman wholly devoted to the common interest of all citizens will be under the constant necessity of satisfying special interests” (ibid).

In the sense explained, Hayek’s demand that the power of the majority must be limited by general rules does not only reflect the liberal ideal of safeguarding individual freedom, it can be argued to be equally in line with the democratic ideal of safeguarding citizen sovereignty. This argument is indeed implied when Hayek points out that effectively denying government and legislator the power to grant privileges is not only an essential means for securing individual liberty, but also a pre-condition for “the power of the state to be freed up again for those tasks that are in fact in the common interest.”61 To be sure, as Hayek (1960: 154f) recognizes, depriving government and legislator of the power to grant privileges does not eliminate every threat to individual liberty. Yet, so he argues, even though liberty may also be severely limited by general rules that are equally applicable to all, an important “primary precaution” against this threat is provided by the requirement “that the rules must apply to those who lay them down and those who apply them – that is to the government as well as to the governed – and that nobody has the power to grant exceptions” (ibid.: 155).62 In Hayek’s account, to limit the power of Hayek (1978a: 96): “There is no reason whatever to expect that an omnipotent democratic government will always serve the general rather than particular interests. Democratic government free to benefit particular groups is bound to be dominated by coalitions of organized interests, rather than serve the general interest in the classical sense of ‘common rights and justice, excluding all partial or private interest.’” Hayek (2001: 87; translated by V.V.).

Hayek (1960: 155) adds: “If all that is prohibited and enjoined is prohibited and enjoined for all without exception (unless such exception follows from another general rule) and if even authority has no special powers except that of enforcing the law, little that anybody may reasonably wish to do is likely to be prohibited.” – Hayek does not ignore the problem that it may not always be obvious whether rules are government and legislator in such manner does not mean to weaken the effective power of the democratic state but does, on the contrary, strengthen its ability to devote its powers to its true task, namely to advance the common interests of its citizens. “The reason is,” as he notes, “that democratic government, if nominally omnipotent, becomes as a result of its unlimited powers exceedingly weak, the playball of all the separate interests it has to satisfy to secure majority support” (1979: 99).63 What is at stake here is not a demand to impose, as an ‘external’ constraint, preconceived “liberal” principles on how sovereign citizens of democratic polities are to govern their own affairs. Rather, the purpose is to point to the need to submit the democratic decisionmaking process to rules that promise to serve the citizens’ common interests.64 In other words, the demand for constitutional constraints on government power can be made on behalf of the democratic ideal of citizen sovereignty no less than

on behalf of the liberal ideal of securing individual liberty. Or, as Hayek puts it (1960:

115): “The liberal believes that the limits that he wants democracy to impose upon itself discriminating or not and that, in this regard, workable criteria are needed. For a discussion of this issue see Hayek (1960: 153f.). – See also Hayek (2003: 171).

Hayek (2001: 87; translated by V.V.): „In a democracy a state with unlimited powers is necessarily a weak state, dependent upon interest groups that will raise their demands exactly because the state has the power to satisfy them, and the government must satisfy if it wants to maintain a governing majority. Such a state will soon be an ineffective state that is forced to buy agreement to its policies through bribing interest groups.” -- It is, as Hayek asserts (2001: 85; translated by V.V.), only “an apparent paradox that the greater the legal powers of the highest bodies of the state are, the weaker they are in truth. The reason is very simple. A representative body that can legally grant privileges is forced to do so.” – On this issue see also Hayek 1978b: 107f.; 1978d: 157. – The founders of the Freiburg School of Ordoliberalism (see Vanberg 2001c), Walter Eucken and Franz Böhm, argued likewise that the seemingly ‘strong’ interventionist state is in fact a weak state, “a plaything in the hands of interest groups” (Eucken 1990: 326: Böhm 1980: 258), and they used the term ‘strong state’ as a label for a constitutionally constrained state that is unable to serve the demands of interest groups for special treatment. As Böhm (1989: 61; 1980: 148) put it: “The situation in a private law society which is combined with a democratically structured constitutional state favors the realization of a social structure which makes the attempt by social groups to exploit other social groups a more and more hopeless undertaking.” That in his view the ideals of democracy and liberalism are intimately related, Hayek indicates when he writes: “But while... it seems almost certain that unlimited democracy will abandon liberal principles in favor of discriminating measures benefiting the various groups supporting the majority it is also doubtful whether in the long run democracy can preserve itself if it abandons liberal principles. … It is therefore not unlikely that the abandonment of liberalism by democracy will in the long run also lead to the disappearance of democracy” (1978c: 143f.). – On this issue von Mises (1981: 64f.) has noted: “Grave injury has been done to the concept of democracy by those who … conceived it as limitless rule of the volonté générale (general will). … The conflicts which arise out of this misconception show that only within the framework of Liberalism does democracy fulfill a social function. Democracy without Liberalism is a hollow form.” are also the limits within which it can work effectively and within which the majority can truly direct and control the actions of government.” Improving Democracy: Hayek’s Proposal for Institutional Reform “Many of the gravest defects of contemporary government, widely recognized and deplored but believed to be inevitable consequences of democracy, are in fact the consequences only of the unlimited character of present democracy” (Hayek 1979: 143).





In thus summarizing his own diagnosis of the deficiencies of contemporary democracy Hayek points out the direction that institutional reforms must take if democracy is not only to safeguard the liberal ideal of individual liberty but also to live up to its own ideal of citizen sovereignty. According to what has been argued above, the main focus of such reforms must be provisions that aim at preventing discriminatory politics by restricting the power of government and legislator to grant special privileges.65 Hayek’s own proposal for reforming the institutions of democracy is explicitly aimed at this goal. It can be read as a recommendation to the citizens of democratic polities for how they may improve the capacity of the democratic decisionmaking process to advance their genuine common interests and to limit the scope for a policy of privilege granting that can only work to their mutual detriment.66 In Hayek’s account, the principal defect in the prevailing institutional structure of democracy must be seen in the fact that one and the same representative body, the parliament, has been entrusted with two fundamentally different tasks. The one task is making the general laws on which the democratic society is based, including the laws for the “private realm,” i.e. the rules of the private law society, as well as the laws for the “public realm,” i.e. the rules of politics. And the other In the concluding remarks to a proposal for constitutional reform that he was invited to make Buchanan (2005) notes: “(P)erhaps the Hayekian requirement for political nondiscrimination seems the most inclusive. … If all governmental action must conform to the generality norm, how much regulation could exist?” – Buchanan (1992) discusses the general issue of “How Can Constitutions Be Designed So That Politicians Who Seek To Serve ‚Public Interest’ Can Survive?” – In reference to Buchanan’s and Tullock’s arguments on the “logical foundations of constitutional democracy” W.H. Hutt (1975: 29) notes: “(A)lmost every conclusion they draw appears to justify constitutional restraint to exclude the use of the State for the achievement of differential advantages. And that enshrines, we suggest, … what classic liberalism has above all stood for.” Hayek (1978d: 155): “I believe indeed that the suggestion of a reform, to which my critique of the present institutions of democracy will lead, would result in a truer realization of the common opinion of the majority of citizens than the present arrangements for the gratification of the will of the separate interest groups which add up to a majority.” task is to monitor and direct the day-to-day activities of the current government.67 As Hayek argues, the inevitable effect of the bundling of these two tasks in one and the same assembly has been “that the supreme governmental authority became free to give itself currently whatever laws helped it best to achieve the particular purposes of the moment” (1979: 101). An assembly that is entrusted with both tasks will be under the constant temptation to use its legislative authority in the service of short-term interests of the current administration, at the expense of the true task of legislation, which is to choose, with a long-term perspective, rules of the game that, if applied over an extended period of time, serve the common interests of the citizenry best.68 Its short-term approach to legislation is, as Hayek charges, the principal reason why such an assembly must become the target of the pressures of interest groups, and will be forced to “use its powers to satisfy the demands of sectional interests” (1978b: 115).



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